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American Greetings Announces Improved Second Quarter Results
CLEVELAND, September 20 /PRNewswire/ -- American Greetings Corporation (NYSE: AM) today announced its second quarter results for the fiscal quarter ended August 24, 2007. Second Quarter Results For the second quarter of fiscal 2008, the Company reported total revenue of US$377.4 million, pre-tax income from continuing operations of US$12.9 million, and income from continuing operations of US$8.7 million or 16 cents per share (all per-share amounts assume dilution). For the second quarter of fiscal 2007, the Company reported total revenue of US$371.5 million, a pre-tax loss from continuing operations of US$13.9 million, and a loss from continuing operations of US$12.6 million or 22 cents per share. Management Comments and Outlook Chief Executive Officer Zev Weiss said, "I am pleased with the improvement in our financial performance this quarter as the team has been working hard on several initiatives. Specifically, our everyday and seasonal card performance improved nicely. The combination of the improved performance in our card business as well as careful management of our costs caused our results to be well above the prior period." Weiss affirmed the Corporation's previously announced estimate of earnings per share from continuing operations for fiscal 2008 to be between US$1.35 to US$1.55 per share. "While I am happy with our first half results, we have a lot of initiatives planned in the second half of the year. The team is working hard with our retail partners to accomplish our mutual goals. Given the strong start to the year, but also recognizing that the seasonality of our business causes the majority of our earnings to typically be earned during the second fiscal half, we remain comfortable with our earnings guidance for the full year," added Weiss. Financing Activities Under the Company's US$100 million share repurchase program, during the second quarter, the Company purchased approximately 300,000 shares of its common stock for about US$7 million. The Company has reduced its diluted share count by about one-third over the past 28 months. The Company's Board of Directors authorized a cash dividend of 10 cents per share to be paid on October 15, 2007 to shareholders of record at the close of business on October 5, 2007. Conference Call on the Web American Greetings will broadcast its conference call live on the Internet at 9:00 a.m. Eastern time today. The conference call will be accessible through the Investor Relations section of the American Greetings Web site at http://investors.americangreetings.com. A replay of the call will be available on the site. About American Greetings Corporation American Greetings Corporation (NYSE: AM) is one of the world's largest manufacturers of social expression products. Along with greeting cards, its product lines include gift wrap, party goods, stationery, calendars, ornaments and electronic greetings. Located in Cleveland, Ohio, American Greetings generates annual revenue of approximately US$1.7 billion. For more information on the Company, visit http://corporate.americangreetings.com. Certain statements in this release, including those under "Management Comments and Outlook" may constitute forward-looking statements within the meaning of the Federal securities laws. These statements can be identified by the fact that they do not relate strictly to historic or current facts. They use such words as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These forward-looking statements are based on currently available information, but are subject to a variety of uncertainties, unknown risks and other factors concerning the Company's operations and business environment, which are difficult to predict and may be beyond the control of the Company. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect the Company's future financial performance, include, but are not limited to, the following: -- retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms; -- the Company's ability to successfully implement its strategy to invest in its core greeting card business; -- the timing and impact of investments in new retail or product strategies as well as new product introductions and achieving the desired benefits from those investments; -- the timing and impact of converting customers to a scan-based trading model; -- the ability to execute share repurchase programs or the ability to achieve the desired accretive effect from such repurchases; -- the Company's ability to successfully complete, or achieve the desired benefits associated with, dispositions; -- a weak retail environment; -- consumer acceptance of products as priced and marketed; -- the impact of technology on core product sales; -- competitive terms of sale offered to customers; -- successful implementation of supply chain improvements and achievement of projected cost savings from those improvements; -- increases in the cost of material, energy, freight, and other production costs; -- the Company's ability to comply with its debt covenants; -- fluctuations in the value of currencies in major areas where the Company operates, including the U.S. Dollar, Euro, U.K. Pound Sterling, and Canadian Dollar; -- escalation in the cost of providing employee health care; -- successful integration of acquisitions; and -- the outcome of any legal claims known or unknown. Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators and the public's acceptance of online greetings and other social expression products. In addition, this release contains time-sensitive information that reflects management's best analysis as of the date of this release. American Greetings does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Further information concerning issues that could materially affect financial performance related to forward-looking statements can be found in the Company's periodic filings with the Securities and Exchange Commission, including the "Risk Factors" section of the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 2007. AMERICAN GREETINGS CORPORATION SECOND QUARTER CONSOLIDATED STATEMENT OF OPERATIONS FISCAL YEAR ENDING FEBRUARY 29, 2008 (In thousands of dollars except share and per share amounts) (All amounts in USD) (Unaudited) Three Months Ended Six Months Ended --------------------- ---------------------- August 24, August 25, August 24, August 25, 2007 2006 2007 2006 --------- --------- --------- --------- Net sales $365,821 $357,483 $783,834 $761,653 Other revenue 11,606 14,044 13,558 15,485 ------- ------- ------- ------- Total revenue 377,427 371,527 797,392 777,138 Material, labor and other production costs 163,052 172,808 324,180 348,045 Selling, distribution and marketing expenses 144,584 151,475 285,275 294,055 Administrative and general expenses 55,938 56,881 117,810 118,229 Other operating income - net (320) (93) (680) (422) ------- ------- ------- ------- Operating income (loss) 14,173 (9,544) 70,807 17,231 Interest expense 4,839 7,609 9,596 20,073 Interest income (2,227) (2,628) (3,719) (5,458) Other non-operating income - net (1,352) (642) (2,896) (2,902) ------- ------- ------- ------- Income (loss) from continuing operations before income tax expense (benefit) 12,913 (13,883) 67,826 5,518 Income tax expense (benefit) 4,187 (1,326) 28,478 1,525 ------- ------- ------- ------- Income (loss) from continuing operations 8,726 (12,557) 39,348 3,993 (Loss) income from discontinued operations, net of tax (351) 2,059 (923) 901 ------- ------- ------- ------- Net income (loss) $8,375 $(10,498) $38,425 $4,894 ======= ======= ======= ======= Earnings (loss) per share - basic: Income (loss) from continuing operations $0.16 $(0.22) $0.71 $0.06 (Loss) income from discontinued operations (0.01) 0.04 (0.02) 0.02 ------- ------- ------- ------- Net income (loss) $0.15 $(0.18) $0.69 $0.08 ======= ======= ======= ======= Earnings (loss) per share - assuming dilution: Income (loss) from continuing operations $0.16 $(0.22) $0.71 $0.06 (Loss) income from discontinued operations (0.01) 0.04 (0.02) 0.02 ------- ------- ------- ------- Net income (loss) $0.15 $(0.18) $0.69 $0.08 ======= ======= ======= ======= Average number of common shares outstanding 55,766,802 58,133,066 55,514,759 58,135,148 Average number of common shares outstanding - assuming dilution 56,180,165 58,133,066 55,902,189 59,990,069 Dividends declared per share $0.10 $0.08 $0.20 $0.16 AMERICAN GREETINGS CORPORATION SECOND QUARTER CONSOLIDATED STATEMENT OF FINANCIAL POSITION FISCAL YEAR ENDING FEBRUARY 29, 2008 (In thousands of dollars) (All amounts in USD) (Unaudited) --------------------------------- August 24, 2007 August 25, 2006 --------------- --------------- ASSETS CURRENT ASSETS Cash and cash equivalents $192,450 $89,113 Trade accounts receivable, net 71,195 87,926 Inventories 248,176 273,788 Deferred and refundable income taxes 66,399 170,472 Assets of businesses held for sale 2,434 12,648 Prepaid expenses and other 215,369 194,291 ------- ------- Total current assets 796,023 828,238 GOODWILL 226,920 214,969 OTHER ASSETS 402,931 549,931 DEFERRED AND REFUNDABLE INCOME TAXES 98,968 - Property, plant and equipment - at cost 950,273 967,253 Less accumulated depreciation 672,602 665,936 ------- ------- PROPERTY, PLANT AND EQUIPMENT - NET 277,671 301,317 ------- ------- $1,802,513 $1,894,455 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Debt due within one year $22,690 $20,000 Accounts payable 126,341 127,619 Accrued liabilities 70,880 76,071 Accrued compensation and benefits 50,397 48,932 Income taxes 1,457 8,364 Liabilities of businesses held for sale 1,283 639 Other current liabilities 97,765 100,517 ------- ------- Total current liabilities 370,813 382,142 LONG-TERM DEBT 200,988 224,078 OTHER LIABILITIES 147,496 101,744 DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE 29,930 25,775 SHAREHOLDERS' EQUITY Common shares - Class A 51,497 56,858 Common shares - Class B 4,291 4,226 Capital in excess of par value 439,985 412,919 Treasury stock (720,027) (569,143) Accumulated other comprehensive income 10,690 29,726 Retained earnings 1,266,850 1,226,130 --------- --------- Total shareholders' equity 1,053,286 1,160,716 --------- --------- $1,802,513 $1,894,455 ========= ========= AMERICAN GREETINGS CORPORATION SECOND QUARTER CONSOLIDATED STATEMENT OF CASH FLOWS FISCAL YEAR ENDING FEBRUARY 29, 2008 (In thousands of dollars) (All amounts in USD) (Unaudited) Six Months Ended -------------------------------- August 24, 2007 August 25, 2006 --------------- --------------- OPERATING ACTIVITIES: Net income $38,425 $4,894 Loss (income) from discontinued operations 923 (901) ------- ------- Income from continuing operations 39,348 3,993 Adjustments to reconcile to net cash provided by operating activities: Net gain on disposal of fixed assets (41) (24) Loss on extinguishment of debt - 4,972 Depreciation and amortization 23,919 24,823 Deferred income taxes 14,335 15,532 Other non-cash charges 3,861 7,016 Changes in operating assets and liabilities, net of acquisitions and dispositions: Decrease in trade accounts receivable 33,385 55,353 Increase in inventories (61,980) (57,101) Increase in other current assets (2,750) (24,196) Decrease in deferred costs - net 28,451 26,787 Decrease in accounts payable and other liabilities (23,400) (33,170) Other - net 2,952 4,152 ------- ------- Cash Provided by Operating Activities 58,080 28,137 INVESTING ACTIVITIES: Proceeds from sale of short-term investments 480,630 1,026,280 Purchases of short-term investments (480,630) (817,540) Property, plant and equipment additions (13,577) (18,708) Cash payments for business acquisitions, net of cash acquired (6,056) (11,154) Cash receipts related to discontinued operations 3,419 9,559 Proceeds from sale of fixed assets 1,105 461 ------- ------- Cash (Used) Provided by Investing Activities (15,109) 188,898 FINANCING ACTIVITIES: Increase in long-term debt - 200,000 Reduction of long-term debt - (440,505) Increase in short-term debt - 20,000 Sale of stock under benefit plans 24,250 2,804 Purchase of treasury shares (11,883) (108,674) Dividends to shareholders (11,115) (9,164) Debt issuance costs - (8,136) ------- ------- Cash Provided (Used) by Financing Activities 1,252 (343,675) DISCONTINUED OPERATIONS: Cash used by operating activities from discontinued operations (789) (2,296) Cash provided by investing activities from discontinued operations - 1,656 ------- ------- Cash Used by Discontinued Operations (789) (640) EFFECT OF EXCHANGE RATE CHANGES ON CASH 4,303 2,780 ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 47,737 (124,500) Cash and Cash Equivalents at Beginning of Year 144,713 213,613 ------- ------- Cash and Cash Equivalents at End of Period $192,450 $89,113 ======= ====== AMERICAN GREETINGS CORPORATION SECOND QUARTER CONSOLIDATED SEGMENT DISCLOSURES FISCAL YEAR ENDING FEBRUARY 29, 2008 (In thousands of dollars) (All amounts in USD) (Unaudited) Three Months Ended Six Months Ended --------------------- --------------------- August 24, August 25, August 24, August 25, 2007 2006 2007 2006 --------- --------- --------- --------- Total Revenue: North American Social Expression Products $255,881 $244,220 $552,975 $537,183 Intersegment items (13,942) (15,310) (22,109) (32,858) Exchange rate adjustment 1,341 170 1,346 107 ------- ------- ------- ------- Net 243,280 229,080 532,212 504,432 International Social Expression Products 59,390 62,385 119,044 126,493 Exchange rate adjustment 5,257 (59) 9,352 (2,321) ------- ------- ------- ------- Net 64,647 62,326 128,396 124,172 Retail Operations 37,382 39,453 76,306 82,954 Exchange rate adjustment 1,069 183 1,073 121 ------- ------- ------- ------- Net 38,451 39,636 77,379 83,075 AG Interactive 17,158 20,447 37,052 40,488 Exchange rate adjustment (2) 40 1 45 ------- ------- ------- ------- Net 17,156 20,487 37,053 40,533 Non-reportable segments 13,885 19,936 22,268 24,831 Unallocated 8 62 84 95 ------- ------- ------- ------- $377,427 $371,527 $797,392 $777,138 ======= ======= ======= ======= Segment Earnings (Loss): North American Social Expression Products $40,799 $15,417 $127,739 $83,578 Intersegment items (10,467) (10,919) (16,722) (23,829) Exchange rate adjustment 798 82 803 49 ------- ------- ------- ------- Net 31,130 4,580 111,820 59,798 International Social Expression Products 1,393 559 1,433 1,056 Exchange rate adjustment 200 18 347 64 ------- ------- ------- ------- Net 1,593 577 1,780 1,120 Retail Operations (6,484) (9,071) (9,265) (16,372) Exchange rate adjustment (3) (5) (3) (3) ------- ------- ------- ------- Net (6,487) (9,076) (9,268) (16,375) AG Interactive 3,177 1,208 6,473 3,249 Exchange rate adjustment (8) 2 (17) 1 ------- ------- ------- ------- Net 3,169 1,210 6,456 3,250 Non-reportable segments 2,035 6,735 2,962 4,640 Unallocated (18,456) (17,856) (45,849) (46,762) Exchange rate adjustment (71) (53) (75) (153) ------- ------- ------- ------- Net (18,527) (17,909) (45,924) (46,915) ------- ------- ------- ------- $12,913 $(13,883) $67,826 $5,518 ======= ======= ======= ======= Web site: http://corporate.americangreetings.com
